Local governments urged to reinvest proceeds from property sales

A two-story red brick building stands a five-minute walk from the rapeseed flower fields along the Taehwa River in Ulsan. It served as a public daycare center for more than 30 years but closed in February last year due to declining birth rates. Selling the land and building could have quickly addressed the city’s financial needs, and most local governments would have taken that route.

Ulsan, however, chose a different path. Responding to concerns about gaps in weekend and nighttime childcare, the city converted the facility in July last year into a 24/7 emergency care center. By last month, more than 7,000 children had used the center. The space that had once been closed now echoes with children’s laughter, illustrating how public assets can shape a community’s future.

Unfortunately, such decisions are rare. As highlighted in a Dong-A Ilbo series, “Local Governments Sell Land to Fill Cash Shortfalls” (published Nov. 18 and 19), many local governments trade public assets for one-time expenditures. In 2021, Mokpo City in South Jeolla Province sold the Yudal Stadium site for 93.6 billion won, using about 30 billion won to pay off debt or distribute cash, breaking its own ordinance requiring new assets to be created from such sales.

An even larger concern is that many assets fail to fetch fair value. Over the past five years, 96.6% of 1,532 local government property sales were conducted through private contracts rather than open competitive bidding. Some properties were sold for more than 3 billion won below their appraised value, and in certain cases, officials received nearly 2 billion won in illicit payments. Without oversight, local government assets have become vulnerable to favoritism and corruption.

It is a positive sign that the Ministry of the Interior and Safety has intervened. The ministry plans to establish a professional institution to ensure local governments receive fair value for property sales and to revise the law to require comprehensive reviews every five years. Information scattered across local government websites will be consolidated into a single platform, creating a verification system.

However, the key issue remains unaddressed: there are no guiding principles for how the proceeds should be used. Using public assets to cover shortfalls is no different from delaying pension reforms or issuing government bonds indiscriminately. It breaches the “intergenerational contract,” allowing the current generation to consume future resources. The difference is that local government sales occur quietly and gradually, away from public scrutiny.

What is needed now is a principle of reinvestment. Proceeds from land sales should be legally required to be reinvested in other assets or growth foundations. Assets that form a city’s strategic base should be subject to even stricter review. Without such rules, more than 600 trillion won in local government assets could be reduced to mere cash machines for elderly care and welfare spending.

Yeongwol County in Gangwon Province offers a model worth noting. Since last year, proceeds from the sale of leftover land or abandoned mines have been kept in a separate fund rather than being mixed into the general account. The fund is then used to purchase prime land for long-term projects, such as industrial complexes with rental housing. Instead of using the money to plug budget gaps, the county is planning for its future.

Protecting and growing local government assets is a commitment to future generations. If you cut open the goose’s belly today, you will not reap golden eggs tomorrow. If you clear a forest to survive winter, you will face landslides in summer. It is worth reflecting on how different our choices would be if we stopped selling land simply to fill our coffers.